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AP Microeconomics

Subjects : economics, ap
Instructions:
  • Answer 50 questions in 15 minutes.
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  • Match each statement with the correct term.
  • Don't refresh. All questions and answers are randomly picked and ordered every time you load a test.

This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. The difference between total revenue and total explicit and implicit costs






2. The firm hires the profit maximizing amount of a resource at the point where MRP = MRC






3. Two goods are consumer substitutes if they provide essentially the same utility to consumers






4. A measure of industry market power. Sum the market share of the four largest firms and a ratio above 40% is a good indicator of oligopoly






5. Exists at the point where the quantity supplied equals the quantity demanded






6. MUx / Px = MUy/Py or MUx/MUy = Px/Py






7. Ed = 0 - no response to price change






8. Ed = (%dQd)/(%dP). Ignore negative sign






9. The marginal utility from consumption of more and more of that item falls over time






10. Additional costs to society not captured by the market supply curve from the production of a good - result in a price that is too low and a market quantity that is too high. Resources are overallocated to the production of this good






11. Ei > 1






12. A period of time long enough to alter the plant size. New firms can enter the industry and existing firms can liquidate and exit






13. Production of the combination of goods and services that provides the most net benefit to society. The optimal quantity of a good is achieved when the MB = MC of the next unit and only occurs at one point on the PPF






14. Direct - purchased - out-of-pocket costs paid to resource suppliers provided by the entrepreneur






15. 0 < Ei < 1






16. The mechanism for combining production resources - with existing technology - into finished goods and services






17. Holding all else equal - when the price of a good rises - consumers decrease their quantity demanded for that good






18. Two goods are consumer complements if they provide more utility when consumed together than when consumed separately






19. The difference between the monopolistic competition output Qmc and the output at minimum ATC. Excess capacity is underused plant and equipment






20. Characterized by many small price-taking firms producing a standardized product in an industry in which there are no barriers to entry or exit






21. The upward part of the LRAC curve where LRAC rises as plant size increases. This is usually the result of the increased difficulty of managing larger firms - which results in lost efficiency and rising per unit costs.






22. The combination of labor and capital that minimizes total costs for a given production rate. Hire L and K so that MPL / PL = MPK / PK or MPL/MPK = PL/PK






23. Exists if a producer can produce more of a good than all other producers






24. Ed > 1 - meaning consumers are price sensitive






25. The change in quantity demanded resulting from a change in the price of one good relative to other goods






26. Total product divided by labor employed. APL = TPL/L






27. Pm > MR = MC - which is not allocatively efficient and dead weight loss exists. Pm > ATC - which is not productively efficient. Profit > 0 so consumer surplus is transferred to the monopolist as profit






28. TR = P * Qd






29. The rate paid on the last dollar earned. This is found by taking the ratio of the change in taxes divided by the change in income






30. Entry of new firms shifts the cost curves for all firms downward






31. Production of maximum output for a given level of technology and resources. All points on the PPF are productively efficient






32. The output where AVC is minimized. If the price falls below this point - the firm chooses to shut down or produce zero units in the short run






33. Additional benefits to society not captured by the market demand curve from the production of a good - result in a price that is too high and a market quantity that is too low. Resources are underallocated to the production of this good






34. The downward part of the LRAC curve where LRAC falls as plan size increases. This is the result of specialization - lower cost of inputs - or other efficiencies of larger scale.






35. The additional cost incurred from the consumption of the next unit of a good or a service






36. Measures the value of what the next unit of a resource (e.g. - labor) brings to the firm. MRPL = MR x MPL. In a perfectly competitive product market - MRPL = P x MPL. In a monopoly product market - MR < P so MRPm < MRPc.






37. Excess demand; a shortage exists at a market price when the quantity demanded exceeds the quantity supplied






38. The total quantity - or total output of a good produced at each quantity of labor employed






39. Pmc < MR = MC and Pmc > minimum ATC so outcome is not efficient - but profit = 0.






40. The additional benefit received from the consumption of the next unit of a good or service






41. Models where firms are competitive rivals seeking to gain at the expense of their rivals






42. Demand for a resource like labor is derived from the demand for the goods produced by the resource






43. The lost net benefit to society caused by a movement away from the competitive market equilibrium






44. Goods that are both nonrival and nonexcludable. One person's consumption does not prevent another from also consuming that good and if it is provided to some - it is necessarily provided to all - even if they do not pay for that good






45. Exists when the production of a good creates utility for third parties not directly involved in the consumption of production of the good






46. A good for which higher income increases demand






47. The proportion of the tax paid by the consumers in the form of a higher price for the taxed good is greater if demand for the good is inelastic and supply is elastic






48. Exists when the production of a good imposes disutility upon third parties not directly involved in the consumption or production of the good






49. The imbalance between limited productive resources and unlimited human wants






50. An economic system based upon the fundamentals of private property - freedom - self-interest - and prices